M/s Mahindra Electric Mobility Ltd , Bangalore V. Assistant Commissioner of Income Tax Circle-4(1)(2), Bangalore

ITA 641/BANG/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0011 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 17-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MEERA MALHOTRA II
• Assessee Lawyers: H P MAHAJANI
• Keywords: Bonafide belief; Agreed addition; Condonation of delay; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO. 641/BANG/2017 ASSESSMENT YEAR : 2012 - 13 M/S. MAHINDRA ELECTRIC MOBILITY LTD., (FORMERLY KNOWN AS MAHINDRA REVA ELECTRIC VEHICLES LTD.), (FORMERLY KNOWN AS MAHINDRA REVA ELECTRIC VEHICLES PVT. LTD.), CORP. OFF. 8 TH FLOOR, GOLD HILL SQUARE PARK, # 690, HOSUR ROAD, BOMMANAHALLI, BENGALURU 560 068. PAN: AABCR 2858R VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 4(1)(2), BANGALORE. APP ELL ANT RESPONDENT A PP EL LANT BY : SHRI H.P. MAHAJANI, CA RE SPONDENT BY : MS. MEERA MALHOTRA, CIT(DR - II), ITAT, BENGALURU. DATE OF HEARING : 17.07 .201 8 DATE OF PRONOUNCEMENT : 14.09 . 201 8 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 26.09.2016 OF THE CIT(APPEALS)04, BANGALORE FOR THE ASSESSMENT YEAR 2012-13. 2. THERE IS A DELAY OF 90 DAYS IN FILING THE APPEAL BY THE ASSESSEE. THE DELAY IN FILING THE APPEAL HAS BEEN EXPLAINED A S DUE TO THE FOLLOWING CIRCUMSTANCES. THE ASSESSEE WAS REPRESENTED BEFORE THE ASSESSING ITA NO. 641/BANG/2017 PAGE 2 OF 17 OFFICER BY FIRM OF CHARTERED ACCOUNTANTS M/S. WALKE R, CHANDIOK & CO. LLP FROM BENGALURU. WHEN THE IMPUGNED ORDER WAS PAS SED, ASSESSEE'S TAX MATTERS WERE INTERNALLY HANDLED BY MR. A NARAYA NA SWAMY WHO IS IN THE EMPLOYMENT OF THE ASSESSEE SINCE 1ST OCTOBER 20 03. DURING DISCUSSION WITH THE TAX CONSULTANTS A VIEW EMERGED THAT SINCE THE CLAIM UNDER SECTION 35(2AB) OF THE ACT WAS DISALLOWED FOR NON-RECEIPT OF ORDER OF DSIR IN FORM 3CL AND SINCE THAT IN TURN WAS ON ACCO UNT OF NON-SUBMISSION OF AUDITED ACCOUNTS OF THE AFORESAID R&D CENTER TO DSIR, THERE WOULD BE NO HOPE OF ANY RELIEF BEFORE APPELLATE AUTHORITIES AND HENCE THERE WAS NO POINT IN CONTESTING THE ISSUE ANY FURTHER. THUS, AP PEAL WAS NOT PREFERRED BEFORE THE HON'BLE TRIBUNAL AGAINST THE ORDER PASSE D BY THE COMMISSIONER OF INCOME TAX (APPEALS). THEREAFTER, ON 22ND FEBRUA RY 2017, THE ASSESSEE WAS SERVED WITH A NOTICE U/S 276C(2) OF TH E ACT IN RESPECT OF AY 2012-13. AT THIS POINT THE ASSESSEE CONTACTED THE T AX CELL OF ITS PARENT COMPANY MAHINDRA & MAHINDRA LIMITED (M & M) IN MUMB AI FOR GUIDANCE. IN TURN THE MATTER WAS ALSO REFERRED TO M/S. B. K. KHA RE AND COMPANY, CHARTERED ACCOUNTANTS, MUMBAI, (BKK) WHO HAVE BEEN THE TAX CONSULTANTS OF MAHINDRA & MAHINDRA LIMITED (M&M) FOR THE LAST S EVERAL DECADES. ALL RELEVANT ORDERS AND OTHER FACTS WERE MADE AVAILABLE TO BKK AND SEVERAL ROUNDS OF EMAILS AND TELEPHONIC CONFERENCES TOOK PL ACE BETWEEN THE APPELLANT, M&M AND BKK. AFTER A GREAT DEAL OF DELI BERATION, IT WAS DECIDED THAT THERE WAS GREAT DEAL OF MERIT IN THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 35(2AB) FOR THE REASON THAT THE R & D CENTER WA S DULY APPROVED BY DSIR AND, MORE IMPORTANTLY, THE ASSESSEE'S CLAIM UN DER SECTION 35(2AB) WAS APPROVED BY DSIR FOR ALL SUBSEQUENT YEARS AND H AD ALSO BEEN ALLOWED BY THE ASSESSING OFFICER. IT WAS THEREFORE, FELT THAT THE REJECTION OF THE CLAIM WAS ON MERE TECHNICAL GROUNDS AND NOT ON MERI TS OF THE MATTER. THE ASSESSEE WAS ADVISED BY BKK THAT THE INCOME TAX ACT DID NOT LAY DOWN ANY TIME PERIOD FOR SUBMITTING THE AUDITED ACCOUNTS OF THE APPROVED R & D ITA NO. 641/BANG/2017 PAGE 3 OF 17 CENTER; IT WAS ONLY THE GUIDELINES ISSUED BY DSIR W HICH LAID DOWN THE TIMELINE. THERE WAS ALSO NO PROVISION FOR FURNISHIN G OF APPROVAL IN FORM 3CL BY DSIR TO THE ASSESSING OFFICER. THE ASSESSEE WAS ADVISED THAT THESE GUIDELINES THUS TRAVELLED BEYOND THE ACT AND THE RULES FRAMED THEREUNDER. THE ASSESSEE WAS ALSO INFORMED BY BKK T HAT IN THE CASE OF M&M, HON'BLE TRIBUNAL OF MUMBAI HAD ALLOWED THE CLA IM EVEN IN THE ABSENCE OF CERTIFICATE IN FORM 3CL. BKK ALSO ADVIS ED THE ASSESSEE TO GET THE ACCOUNTS OF THE R & D CENTER FOR THE CONCER NED YEAR AUDITED BY THE STATUTORY AUDITORS OF THE ASSESSEE AND TO FURNI SH THEM TO DSIR WITH A PRAYER FOR CONDONATION OF THE DELAY. ACCORDINGLY THE ASSESSEE DECIDED TO FILE APPEAL ON ADVISE OF BKK. IT IS CLAIMED TH AT THE ASSESSEE WAS PUT UNDER A BONAFIDE BELIEF THAT REJECTION OF THE CLAIM U/S 35(2AB) DID NOT INVOLVE ANY DEBATABLE ISSUE REQUIRING ADJUDICATION AT HIGHER LEVELS. THEREFORE, IT DID NOT FILE AN APPEAL AGAINST THE IM PUGNED APPELLATE ORDER. NOW, ON THE BASIS OF EMERGED VIEW, THE ASSESSEE HAS BEEN MADE AWARE THAT THE REJECTION OF ITS CLAIM WAS ONLY ON TECHNIC AL GROUNDS AND THERE WAS SUBSTANTIAL MERIT IN ITS CLAIM, WHICH STOOD ACCEPTE D BY THE DEPARTMENT IN LATER YEARS. THE CONTENTIONS AS STATED ABOVE IN T HE APPLICATION FOR CONDONATION OF DELAY ARE SUPPORTED BY AFFIDAVIT OF MR.MAHESH BABU, CHIEF EXECUTIVE OFFICER OF THE ASSESSEE. 3. IN THE ABOVE CIRCUMSTANCES, THE ASSESSEE HAS PRA YED THAT THE NON- FILING OF THE APPEAL IN THE FIRST INSTANCE AND THE RESULTANT DELAY AROSE OUT OF BONAFIDE REASONS. THE DELAY WAS NOT ON ACCOUNT OF A NY GROSS NEGLIGENCE OR DELIBERATE DISREGARD OF ITS RIGHTS OR GROSS INAC TION ON THE PART OF THE ASSESSEE. THERE WAS SUFFICIENT CAUSE FOR THE DELAY AS STATED ABOVE. IT HAS ALSO BEEN SUBMITTED THAT NON-ADMISSION OF ASSESSEE' S CLAIM WOULD RESULT IN AN OTHERWISE MERITORIOUS MATTER BEING THROWN OUT ON A MERE TECHNICALITY. NO PREJUDICE WOULD BE CAUSED TO THE REVENUE BY ALLO WING THE APPEAL TO BE ITA NO. 641/BANG/2017 PAGE 4 OF 17 ADMITTED AND PROCEEDED WITH ON MERITS MORE SO WHEN THE CLAIM HAS BEEN ALLOWED BY THE DEPARTMENT IN SUBSEQUENT YEARS. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT IF THIS APPLICATION FOR CONDONATION OF DELAY IN FILING THE APPEAL IS NOT ALLOWED, THE APPELLANT WOULD BE PUT TO GREAT HARDSHIP AND IRREPA RABLE INJURY AND ON THE OTHER HAND NO HARDSHIP OR INJURY WOULD BE CAUSED TO THE RESPONDENT IF THIS APPLICATION OF CONDONATION OF DELAY IS ALLOWED. REL IANCE WAS PLACED ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF C OLLECTOR, LAND ACQUISITION VS. MST. KATIJI AND OTHERS (1987) 167 I TR 471 AND ALSO IN THE CASE OF CONCORD OF INDIA INSURANCE CO. LTD., VS SMT . NIRMALA DEVI AND OTHERS 118 ITR 507. FURTHER RELIANCE WAS ALSO PLACE D ON ANOTHER DECISION OF THE HON'BLE APEX COURT IN THE CASE OF RADHA KRIS HNA RAI VS. ALLAHABAD BANK & OTHERS [2000] 9 SUPREME COURT CASES 733 AND COMMISSIONER OF INCOME-TAX VS. WEST BENGAL INFRASTRUCTURE DEVELOPME NT FINANCE CORPORATION LIMITED (2011) 334 ITR 269 (SC). RELIAN CE WAS ALSO PLACED ON THE UNREPORTED DECISION OF THE HON'BLE JURISDICTION AL KARNATAKA HIGH COURT IN THE CASE OF CIT & ANOTHER VS. ISRO SATELLITE CEN TER, IN ITA NO. 532 OF 2008 AND OTHER BATCH OF APPEAL ORDER DATED 28/10/20 11 HAS CONDONED THE DELAY OF 5 YEARS IN FILING THE APPEAL BEFORE THE CI T[A]. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE HON'BLE JURISDICTIONA L TRIBUNAL IN THE CASE OF SMT. SHAKUNTALA HEGDE, LEGAL HEIR OF MR. RAMAKRISHN A HEGDE VS. ACIT, IN ITA NO. 2785/BANG/2004 ORDER DATED 25/04/2006 WH EREIN THE HON'BLE JURISDICTIONAL TRIBUNAL HAS CONDONED THE DELAY OF 1 ,331 DAYS I.E., 3 YEARS, 8 MONTHS AND 22 DAYS IN FILING THE APPEAL BY THE AS SESSEE. 5. THE LEARNED DR SUBMITTED THAT SINCE THE ADDITION WAS AN AGREED ADDITION, THE PLEA OF WRONG ADVICE BY PROFESSIONAL CANNOT BE PLEADED BY THE ASSESSEE. ITA NO. 641/BANG/2017 PAGE 5 OF 17 6. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIV AL SUBMISSIONS. AT THE OUTSET, WE OBSERVE THAT THE HONBLE SUPREME COU RT, IN THE CASE OF MST. KATIJI (SUPRA) , HAS EXPLAINED THE PRINCIPLES THAT NEED TO BE KEPT IN MIND WHILE CONSIDERING AN APPLICATION FOR CONDONATION OF DELAY. THE HONBLE APEX COURT HAS EMPHASIZED THAT SUBSTANTIAL JUSTICE SHOULD PREVAIL OVER TECHNICAL CONSIDERATIONS. THE COURT HAS ALSO EXPLAI NED THAT A LITIGANT DOES NOT STAND TO BENEFIT BY LODGING THE APPEAL LATE. TH E COURT HAS ALSO EXPLAINED THAT EVERY DAYS DELAY MUST BE EXPLAINED DOES NOT MEAN THAT A PEDANTIC APPROACH SHOULD BE TAKEN. THE DOCTRINE MUS T BE APPLIED IN A RATIONAL COMMON SENSE AND PRAGMATIC MANNER. IN THE CASE OF SHAKUNTALA HEGDE, L/R OF R.K. HEGDE V. ACIT, ITA NO.2785/BANG/ 2004 FOR THE A.Y. 1993-94 , THE TRIBUNAL CONDONED THE DELAY OF ABOUT 1331 DAY S IN FILING THE APPEAL WHEREIN THE PLEA OF DELAY IN FILING APPEAL D UE TO ADVICE GIVEN BY A NEW COUNSEL WAS ACCEPTED AS SUFFICIENT. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. ISRO SATELLITE CENTRE, ITA NO. 532/2008 DATE D 28.10.2011 HAS CONDONED THE DELAY OF FIVE YEARS IN FILING APP EAL BEFORE THEM WHICH WAS EXPLAINED DUE TO DELAY IN GETTING LE GAL ADVICE FROM ITS LEGAL ADVISORS AND GETTING APPROVAL FROM DEPARTMENT OF SC IENCE AND PMO. IN THE AFORESAID DECISION, THE HONBLE COURT FOUND THAT TH E VERY LIABILITY OF THE ASSESSEE WAS NON-EXISTENT AND THEREFORE CONDONED TH E DELAY IN FILING APPEAL. KEEPING IN MIND THE AFORESAID PRINCIPLES, WE SHALL CONSIDER THE CLAIM OF THE ASSESSEE IN THE PRESENT CASE. 7. ADMITTEDLY, THE DELAY WAS DUE TO ADVICE GIVEN BY THE COUNSEL WHO APPEARED ON BEHALF OF THE ASSESSEE BEFORE THE AO AN D CIT(A) NOT TO FILE APPEAL AND ON ADVICE FROM A PROFESSIONAL FROM MUMBA I TO FILE AN APPEAL, THE APPEAL WAS FILED. WE FIND THAT THERE HAS BEEN NO WILLFUL NEGLECT ON THE PART OF THE ASSESSEE. IN SUCH MATTERS THE ADVICE OF THE PROFESSIONAL WOULD ITA NO. 641/BANG/2017 PAGE 6 OF 17 BE THE POINT OF TIME AT WHICH THE ASSESSEE WOULD BE GIN TO EXPLORE THE OPTION OF EXHAUSTING ALL LEGAL REMEDIES. WE ARE ALS O OF THE VIEW THAT BY CONDONATION OF DELAY THERE IS NO LOSS TO THE REVENU E AS LEGITIMATE TAXES PAYABLE IN ACCORDANCE WITH LAW ALONE WOULD BE COLLE CTED. WE THEREFORE ACCEPT THE REASON GIVEN FOR CONDONATION OF DELAY IN FILING THE APPEAL. THE DELAY IN FILING THE APPEAL IS ACCORDINGLY CONDONED. 8. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL BY THE ASSESSEE IS WITH REGARD TO THE CORRECTNESS OF THE A CTION OF THE REVENUE AUTHORITIES IN DISALLOWING DEDUCTION U/S.35(2AB) OF THE INCOME TAX ACT, 1961 (ACT) TO THE EXTENT OF RS.17,91,22,735/- BY TH E REVENUE AUTHORITIES. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS O F MANUFACTURE OF AUTOMOBILES AND AUTO PARTS. FOR A.Y.2012-13 THE AS SESSEE FILED RETURN OF INCOME ON 27.09.2012 DECLARING LOSS OF RS.60,91,71, 433/-. IN THE RETURN SO FILED WHILE COMPUTING INCOME FROM BUSINESS, THE ASS ESSEE HAD CLAIMED WEIGHTED DEDUCTION U/S 35(2AB) OF THE INCOME TAX AC T, 1961 (ACT) AT A SUM OF RS.35,82,45,470/- BEING EXPENDITURE ON SCIEN TIFIC RESEARCH AND IN- HOUSE RESEARCH AND DEVELOPMENT FACILITY WHICH IS 20 0% OF ACTUAL EXPENDITURE OF RS.17,91,22,735/-. SECTION 35(2AB) OF THE ACT, IN SO FAR AS IT IS RELEVANT TO THE PRESENT APPEAL, READS THUS:- SEC.35 EXPENDITURE ON SCIENTIFIC RESEARCH . IN RESPECT OF EXPENDITURE ON SCIENTIFIC RESEARCH, T HE FOLLOWING DEDUCTIONS SHALL BE ALLOWED (2AB)(1) WHERE A COMPANY ENGAGED IN THE BUSINESS OF BIO- TECHNOLOGY OR IN ANY BUSINESS OF MANUFACTURE OR PRO DUCTION OF ANY ARTICLE OR THING, NOT BEING AN ARTICLE OR THING SPE CIFIED IN THE LIST OF THE ELEVENTH SCHEDULE INCURS ANY EXPENDITURE ON SCI ENTIFIC RESEARCH (NOT BEING EXPENDITURE IN THE NATURE OF CO ST OF ANY LAND OR BUILDING) ON IN-HOUSE RESEARCH AND DEVELOPMENT FACI LITY AS APPROVED BY THE PRESCRIBED AUTHORITY, THEN, THERE S HALL BE ALLOWED A ITA NO. 641/BANG/2017 PAGE 7 OF 17 DEDUCTION OF A SUM EQUAL TO 'TWO TIMES' OF THE EXPE NDITURE SO INCURRED. ..... (2) NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF THE EXPENDITURE MENTIONED IN CLAUSE (1) UNDER ANY OTHER PROVISION O F THIS ACT. (3) NO COMPANY SHALL BE ENTITLED FOR DEDUCTION UNDE R CLAUSE (1) UNLESS IT ENTERS INTO AN AGREEMENT WITH THE PRESCRI BED AUTHORITY FOR COOPERATION IN SUCH RESEARCH AND DEVELOPMENT FACILI TY AND FOR AUDIT OF THE ACCOUNTS MAINTAINED FOR THAT FACILITY . (4) THE PRESCRIBED AUTHORITY SHALL SUBMIT ITS REPOR T IN RELATION TO THE APPROVAL OF THE SAID FACILITY TO THE PRINCIPAL CHIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL DIRECTOR GENERAL OR DIRECTOR GENERAL IN SUCH FORM AND WITHIN SUCH TIME AS MAY BE PRESCRIBED. ......... 9. RULE 6 OF THE INCOME TAX RULES, 1962 (RULES) PRE SCRIBES PROCEDURE TO BE FOLLOWED BY THE PRESCRIBED AUTHORITY FOR GRAN T OF APPROVAL U/S.35(2AB) OF THE ACT. THE RELEVANT PART OF RULE 6, IN SO FAR AS IT RELATES TO THIS APPEAL, READS THUS:- (1B) FOR THE PURPOSES OF SUB-SECTION (2AB) OF SECTI ON 35, THE PRESCRIBED AUTHORITY SHALL BE THE SECRETARY, DEPART MENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH. (4) THE APPLICATION REQUIRED TO BE FURNISHED BY A C OMPANY UNDER SUB-SECTION (2AB) OF SECTION 35 SHALL BE IN FORM NO . 3CK. (5A) THE PRESCRIBED AUTHORITY SHALL, IF HE IS SATI SFIED THAT THE CONDITIONS PROVIDED IN THIS RULE AND IN SUB-SECTION (2AB) OF SECTION 35 OF THE ACT ARE FULFILLED, PASS AN ORDER IN WRITI NG IN FORM NO. 3CM : PROVIDED THAT A REASONABLE OPPORTUNITY OF BEING HEA RD SHALL BE GRANTED TO THE COMPANY BEFORE REJECTING AN APPLICAT ION : ITA NO. 641/BANG/2017 PAGE 8 OF 17 10. UNDER SECTION 35(1)(I) AN ASSESSEE IS ENTITLED TO DEDUCTION IN RESPECT OF EXPENDITURE ON SCIENTIFIC RESEARCH NOT B EING IN THE NATURE OF CAPITAL EXPENDITURE LAID OUT OR EXPENDED ON SCIENTI FIC RESEARCH RELATED TO THE BUSINESS. UNDER SECTION 35(2AB) OF THE ACT DE DUCTION IS ALLOWED AT A SUM EQUAL TO TWO TIMES OF THE EXPENDITURE INCURRED ON SCIENTIFIC RESEARCH IF THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BIO-TECH NOLOGY OR IN ANY BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICL E OR THING, NOT BEING AN ARTICLE OR THING SPECIFIED IN THE LIST OF THE ELEVE NTH SCHEDULE INCURS ANY EXPENDITURE ON SCIENTIFIC RESEARCH (NOT BEING EXPEN DITURE IN THE NATURE OF COST OF ANY LAND OR BUILDING) ON IN-HOUSE RESEARCH AND DEVELOPMENT FACILITY AS APPROVED BY THE PRESCRIBED AUTHORITY. DEDUCTION U/S.35(1)(I) AND SEC.35(2AB) OF THE ACT ARE SIMILAR EXCEPT THAT THE DEDUCTION U/S.35(2AB) IS ALLOWED AS WEIGHTED DEDUCTION AT 200% OF THE EXPEND ITURE, WHILE DEDUCTION U/S.35(1)(I) IS ALLOWED ONLY AT 100%. THE CONDITIO NS FOR ALLOWING DEDUCTION U/S.35(1)(I) OF THE ACT AND UNDER SEC.35(2AB) OF TH E ACT ARE IDENTICAL WITH THE ONLY DIFFERENCE BEING THAT THE ASSESSEE CLAIMIN G DEDUCTION U/S.35(2AB) OF THE ACT SHOULD BE ENGAGED IN MANUFACTURE OF CERT AIN ARTICLES OR THINGS. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS ENGAGED I N BUSINESS TO WHICH SEC.35(2AB) OF THE ACT APPLIED. THE OTHER CONDITIO N REQUIRED TO BE FULFILLED FOR CLAIMING DEDUCTION U/S.35(2AB) OF THE ACT IS TH AT THE RESEARCH AND DEVELOPMENT FACILITY SHOULD BE APPROVED BY THE PRES CRIBED AUTHORITY. THE PRESCRIBED AUTHORITY IS THE SECRETARY, DEPARTMENT O F SCIENTIFIC INDUSTRIAL RESEARCH, GOVT. OF INDIA (DSIR). IT IS NOT IN DISPU TE THAT THE ASSESSEE IN THE PRESENT CASE OBTAINED APPROVAL IN FORM NO.3CM A S REQUIRED BY RULE 6 (5A) OF THE RULES. AS PER THE PROCEDURE FOR CLAIMI NG DEDUCTION U/S35(2AB) OF THE ACT AS PER DEPARTMENT OF SCIENTIFIC AND INDU STRIAL RESEARCH (DSIR) SUBSEQUENT TO THE APPROVAL BY THE DSIR, THE ASSESSE E SHOULD SUBMIT AUDITED ACCOUNTS FOR EACH YEAR FOR EACH APPROVED SC IENTIFIC RESEARCH CENTRE ITA NO. 641/BANG/2017 PAGE 9 OF 17 BY 31 ST OCTOBER OF THE SUCCEEDING YEAR ALONG WITH CERTAIN INFORMATION. THEREAFTER THE DSIR WILL ISSUE A FORM CALLED FORM 3 CL. 11. THE CLAIM OF THE ASSESSEE FOR WEIGHTED DEDUCTIO N AT 200% OF THE EXPENDITURE INCURRED ON SCIENTIFIC RESEARCH WAS REF USED BY THE AO FOR THE ONLY REASON THAT THE ASSESSEE DID NOT GET FORM 3CL FROM DSIR. THE AO, HOWEVER, ALLOWED DEDUCTION U/S.35(1)(I) AT 100% OF THE EXPENDITURE ON SCIENTIFIC RESEARCH. THUS, BY ALLOWING DEDUCTION U/ S.35(1)(I) OF THE ACT, THE AO HAS HIMSELF ACCEPTED THAT THE ASSESSEE HAS COMPL IED WITH ALL THE OTHER CONDITIONS FOR ALLOWING DEDUCTION U/S.35(2AB) OF TH E ACT, EXCEPT THE CONDITION THAT THE ASSESSEE HAS NOT OBTAINED FORM 3 CL FROM DSIR. ON APPEAL BY THE ASSESSEE, THE CIT(A) CONFIRMED THE OR DER OF THE AO. 12. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THE ISSUE THAT NEEDS CONSIDERATION IN THIS APPEAL IS AS TO; WHETHER FOR THE REASON THAT FORM NO.3CL HAS NOT BEEN OBTAINED, CAN DEDUCTION U/S.35( 2AB) OF THE ACT CAN BE DENIED TO AN ASSESSEE? 13. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARN ED DR RELIED ON THE ORDER OF THE AO/CIT(A). THE LEARNED COUNSEL FOR TH E ASSESSEE REITERATED SUBMISSIONS AS WERE MADE BEFORE THE REVENUE AUTHORI TIES AND PLACED RELIANCE ON SOME JUDICIAL PRECEDENTS ON IDENTICAL I SSUE RENDERED BY VARIOUS BENCHES OF ITAT AND HONBLE HIGH COURTS. 14. FOR AY 2012-13, THE PREVIOUS YEAR IS FY 2011-12 I.E., THE PERIOD FROM 1.4.2011 TO 31.3.2012. THE FACTS ON RECORD GO TO SHOW THAT THE ASSESSEES IN-HOUSE R & D FACILITIES WAS APPROVED B Y THE DSIR, GOVT. OF INDIA, MINISTRY OF SCIENCE AND TECHNOLOGY FOR AY 20 12-13 VIDE THEIR LETTER DATED 20.5.2009, A COPY OF WHICH IS PLACED AT PAGE- 30 OF THE ASSESSEES ITA NO. 641/BANG/2017 PAGE 10 OF 17 PAPER BOOK. THE APPROVAL IS FOR THE PERIOD 1.4.200 9 UPTO TO 31.3.2012. THEREFORE, THE CONDITION FOR ALLOWING DEDUCTION U/S .35(2AB) OF THE ACT HAS BEEN FULFILLED BY THE ASSESSEE. THE CLAIM OF THE R EVENUE, HOWEVER, IS THAT THE APPROVAL BY THE PRESCRIBED AUTHORITY IN FORM NO .3CM IS NOT FINAL AND CONCLUSIVE AND THE QUANTUM OF EXPENDITURE ON WHICH DEDUCTION IS TO BE ALLOWED IS TO BE CERTIFIED BY DSIR IN FORM NO.3CL. THERE IS NO STATUTORY PROVISION IN THE ACT WHICH LAYS DOWN SUCH A CONDITI ON. WE SHALL THEREFORE EXAMINE WHAT IS FORM NO.3CL. 15. DSIR HAS FRAMED GUIDELINES FOR APPROVAL U/S.35( 2AB) OF THE ACT. THE GUIDELINES AS ON MAY, 2010 WHICH IS RELEVANT FOR AY 2012-13, IN SO FAR AS IT IS RELEVANT FOR THE PRESENT APPEAL, WAS AS GIVEN BE LOW. (I) AS PER GUIDELINE 5 (IV) OF THE GUIDELINES SO FRAMED, EVERY COMPANY WHICH HAS OBTAINED AN APPROVAL FROM THE PRESCRIBED AUTHORITY SHOULD ALSO SUBMIT AN UNDERTAKING AS PER PART C OF FORM NO. 3CK TO MAINTAIN SEPARATE ACCOUNTS FOR EACH R&D CENTRE A PPROVED UNDER SECTION 35(2AB) BY THE PRESCRIBED AUTHORITY, AND TO GET THE ACCOUNTS DULY AUDITED EVERY YEAR BY AN AUDITOR AS D EFINED IN SUB- SECTION (2) OF SECTION 288 OF THE IT ACT 1961. (THE STATUTORY AUDITORS OF THE COMPANY SHOULD AUDIT THE R&D ACCOUN TS. TO FACILITATE THIS AUDIT SEPARATE BOOKS OF ACCOUNTS FO R R&D SHOULD BE MAINTAINED. ALSO, THE STATUTORY AUDITORS SHOULD SIG N THE AUDITORS CERTIFICATE IN THE DETAILS REQUIRED TO BE SUBMITTED AS PER ANNEXURE- IV OF THE GUIDELINES TO FACILITATE SUBMISSION OF RE PORT IN FORM 3CL). (II) AS PER GUIDELINE 5(VI) OF THE GUIDELINES, TH E AUDITED ACCOUNTS FOR EACH YEAR MAINTAINED SEPARATELY FOR EACH APPROVED C ENTRE SHALL BE FURNISHED TO THE SECRETARY, DEPARTMENT OF SCIENTIFI C & INDUSTRIAL RESEARCH BY 31ST DAY OF OCTOBER OF THE SUCCEEDING Y EAR, ALONG WITH INFORMATION AS PER ANNEXURE-IV OF THE GUIDELIN ES. (III) AS PER GUIDELINE 5(IX) EXPENDITURES, WHICH ARE DIRECTLY IDENTIFIABLE WITH APPROVED R&D FACILITY ONLY, SHALL BE ELIGIBLE FOR THE WEIGHTED TAX DEDUCTION. HOWEVER, EXPENDITURE IN R&D ON UTILI TIES WHICH ARE SUPPLIED FROM A COMMON SOURCE WHICH ALSO SERVICES A REAS OF THE PLANT OTHER THAN R&D MAY BE ADMISSIBLE, PROVIDED TH EY ARE METERED/MEASURED AND SUBJECT TO CERTIFICATION BY A CHARTERED ACCOUNTANT. ITA NO. 641/BANG/2017 PAGE 11 OF 17 (IV) AS PER GUIDELINE 5 (X) EXPENDITURE ON MANPOW ER FROM DEPARTMENTS, OTHER THAN R&D CENTRE, SUCH AS MANUFACTURING, QUALI TY CONTROL, TOOL ROOM ETC. INCURRED ON SUCH FUNCTIONS AS ATTENDING M EETINGS PROVIDING ADVICE / DIRECTIONS, ASCERTAINING CUSTOME R CHOICE/RESPONSE TO NEW PRODUCTS UNDER DEVELOPMENT A ND OTHER LIAISON WORK SHALL NOT QUALIFY FOR DEDUCTION UNDER SECTION 35(2AB) OF I.T. ACT 1961. (V) AS PER GUIDELINE 10 DOCUMENTS REQUIRED TO BE SUBMITTED BY 31 ST OCTOBER OF EACH SUCCEEDING YEAR OF APPROVED PERIOD TO FACILITATE SUBMISSION OF REPORT IN FORM 3CL (2 SETS) ARE COMPL ETE DETAILS AS PER ANNEXURE-IV OF DSIR GUIDELINES. 16. THE ASSESSEE APPLIED FOR ISSUE OF FORM NO.3CL T O THE APPROPRIATE AUTHORITY ON 24.3.2017, AFTER THE ORDER OF THE CIT( A). THE APPLICATION SO MADE BY THE ASSESSEE IS AT PAGE 43 TO 65 OF THE ASS ESSEES PAPER BOOK. ACCORDING TO THE ASSESSEE, IT HAS COMPLIED WITH ALL THE REQUIREMENTS OF THE GUIDELINES FOR ISSUE OF FORM NO.3CL, BUT THE DSIR H AS ISSUED FORM NO.3CL DATED 5.4.2018 FOR AY 2014 & 15 & 2015-16 BU T NO FORM NO.3CL WAS ISSUED FOR AY 2012-13. THOUGH THERE HAS BEEN N O COMMUNICATION TO THE ASSESSEE IN THIS REGARD, THE LEARNED COUNSEL FO R THE ASSESSEE SUBMITTED THAT SINCE THE AUDITED ACCOUNTS WERE NOT SUBMITTED BY 31 ST OCTOBER OF THE SUCCEEDING AY, AS IS REQUIRED UNDER GUIDELINE 5 (VI), THE ASSESSEES APPLICATION WOULD NOT HAVE BEEN CONSIDER ED BY THE DSIR. 17. RULE-6(7A)(B) OF THE RULES SPECIFYING THE PRESC RIBED AUTHORITY AND CONDITIONS FOR CLAIMING DEDUCTION U/S.35(2AB) OF TH E ACT HAS BEEN AMENDED BY THE INCOME TAX (10 TH AMENDMENT) RULES, 2016 W.E.F. 1.7.2016, WHEREBY IT HAS BEEN LAID DOWN THAT THE PRESCRIBED AUTHORITY , I.E., DSIR SHALL QUANTIFY THE QUANTUM OF DEDUCTION TO BE ALLOWED TO AN ASSESS EE U/S.35(2AB) OF THE ACT. PRIOR TO SUCH SUBSTITUTION, THE ABOVE PROVISI ONS MERELY PROVIDED THAT THE PRESCRIBED AUTHORITY SHALL SUBMIT ITS REPORT IN RELATION TO THE APPROVAL OF IN-HOUSE R & D FACILITY IN FORM NO.3CL TO THE DGIT (EXEMPTION) WITHIN 60 ITA NO. 641/BANG/2017 PAGE 12 OF 17 DAYS OF GRANTING APPROVAL. THEREFORE PRIOR TO 1.7. 2016 THERE WAS LEGAL SANCTITY FOR FORM NO.3CL IN THE CONTEXT OF ALLOWING DEDUCTION U/S.35(2AB) OF THE ACT. 18. THE ISSUE AS TO WHETHER DEDUCTION U/S.35(2AB) O F THE ACT CAN BE DENIED FOR ABSENCE OF FORM NO.3CL BY THE DSIR WAS S UBJECT MATTER OF SEVERAL JUDICIAL DECISIONS RENDERED BY VARIOUS BENC HES OF ITAT. (I) THE PUNE ITAT IN THE CASE OF CUMMINS INDIA LTD. VS. DCIT IN ITA NO.309/PUN/2014 FOR AY 2009-10 ORDER DATED 15.5.201 8 HAD AN OCCASION TO CONSIDER A CASE WHERE PART OF THE CLAIM FOR DEDUCTION U/S.35(2AB) OF THE ACT WAS CLAIMED SUPPORTED BY FOR M NO.3CL BUT PART OF IT WAS NOT SUPPORTED BY FORM NO.3CL. THE P UNE ITAT HELD AS FOLLOWS:- 45. THE ISSUE WHICH IS RAISED IN THE PRESENT APPEA L IS THAT WHETHER WHERE THE FACILITY HAS BEEN RECOGNIZED AND NECESSARY CERTIFICATION IS ISSUED BY THE PRESCRIBED AUTHORITY , THE ASSESSEE CAN AVAIL THE DEDUCTION IN RESPECT OF EXPENDITURE I NCURRED ON IN-HOUSE R&D FACILITY, FOR WHICH THE ADJUDICATING A UTHORITY IS THE ASSESSING OFFICER AND WHETHER THE PRESCRIBED AU THORITY IS TO APPROVE EXPENDITURE IN FORM NO.3CL FROM YEAR TO YEAR. LOOKING INTO THE PROVISIONS OF RULES, IT STIPULATES THE FILING OF AUDIT REPORT BEFORE THE PRESCRIBED AUTHORITY BY THE PERSONS AVAILING THE DEDUCTION UNDER SECTION 35(2AB) OF THE ACT BUT THE PROVISIONS OF THE ACT DO NOT PRESCRIBE ANY METH ODOLOGY OF APPROVAL TO BE GRANTED BY THE PRESCRIBED AUTHORITY VIS--VIS EXPENDITURE FROM YEAR TO YEAR. THE AMENDMENT BROUGH T IN BY THE IT (TENTH AMENDMENT) RULES W.E.F. 01.07.2016, W HEREIN SEPARATE PART HAS BEEN INSERTED FOR CERTIFYING THE AMOUNT OF EXPENDITURE FROM YEAR TO YEAR AND THE AMENDED FORM NO.3CL THUS, LAYS DOWN THE PROCEDURE TO BE FOLLOWED BY THE PRESCRIBED AUTHORITY. PRIOR TO THE AFORESAID AMENDMENT IN 2016 , NO SUCH PROCEDURE / METHODOLOGY WAS PRESCRIBED. IN THE ABSE NCE OF THE SAME, THERE IS NO MERIT IN THE ORDER OF ASSESSING O FFICER IN CURTAILING THE EXPENDITURE AND CONSEQUENT WEIGHTED DEDUCTION ITA NO. 641/BANG/2017 PAGE 13 OF 17 CLAIM UNDER SECTION 35(2AB) OF THE ACT ON THE SURMI SE THAT PRESCRIBED AUTHORITY HAS ONLY APPROVED PART OF EXPE NDITURE IN FORM NO.3CL. WE FIND NO MERIT IN THE SAID ORDER OF AUTHORITIES BELOW. 46. THE COURTS HAVE HELD THAT FOR DEDUCTION UNDER S ECTION 35(2AB) OF THE ACT, FIRST STEP WAS THE RECOGNITION OF FACILITY BY THE PRESCRIBED AUTHORITY AND ENTERING AN AGREEMENT BETWEEN THE FACILITY AND THE PRESCRIBED AUTHORITY. ONCE SUC H AN AGREEMENT HAS BEEN EXECUTED, UNDER WHICH RECOGNITIO N HAS BEEN GIVEN TO THE FACILITY, THEN THEREAFTER THE ROL E OF ASSESSING OFFICER IS TO LOOK INTO AND ALLOW THE EXPENDITURE I NCURRED ON IN-HOUSE R&D FACILITY AS WEIGHTED DEDUCTION UNDER S ECTION 35(2AB) OF THE ACT. ACCORDINGLY, WE HOLD SO. THUS, WE REVERSE THE ORDER OF ASSESSING OFFICER IN CURTAILIN G THE DEDUCTION CLAIMED UNDER SECTION 35(2AB) OF THE ACT BY 6,75,000/-. THUS, GROUNDS OF APPEAL NO.10.1, 10.2 A ND 10.3 ARE ALLOWED. (II) THE HYDERABAD ITAT IN THE CASE OF M/S. SRI BIO TECH LABORATORIES INDIA LTD. VS. ACIT ITA NO.385/HYD/2014 FOR AY 2009 -10 ORDER DATED 24.9.2014 TOOK THE VIEW (VIDE PARAGRAPH-13 OF THE ORDER) THAT WHEN THE ASSESSEES R & D FACILITY IS APPROVED THE DEDUCTION U/S.35(2AB) OF THE ACT CANNOT BE DENIED MERELY ON T HE GROUND THAT PRESCRIBED AUTHORITY HAS NOT SUBMITTED REPORT IN FO RM 3CL. 19. THE QUESTION OF ALLOWING DEDUCTION U/S.35(2AB) OF T HE ACT WAS CONSIDERED BY THE HON'BLE DELHI HIGH COURT IN THE C ASE OF CIT VS. SADAN VIKAS (INDIA) LTD. (2011) 335 ITR 117 (DEL) WHERE AO REFUSED TO ACCORD THE BENEFIT OF THE WEIGHTED DEDUCTION TO THE ASSESSEE U NDER S. 35(2AB) ON THE GROUND THAT RECOGNITION AND APPROVAL WAS GIVEN BY T HE DSIR IN FEBRUARY/SEPTEMBER, 2006, I.E., IN THE NEXT ASSESSM ENT YEAR AND, THEREFORE, THE WEIGHTED DEDUCTION CANNOT BE ALLOWED . THE CIT(A) CONFIRMED THE ORDER OF THE AO. THE TRIBUNAL HELD T HAT THE ASSESSEE WOULD BE ENTITLED TO WEIGHTED DEDUCTIONS OF THE AFORESAID EXPENDITURE INCURRED BY ITA NO. 641/BANG/2017 PAGE 14 OF 17 THE ASSESSEE IN TERMS OF THE S. 35(2AB) OF THE ACT AND IN COMING TO THIS CONCLUSION, THE TRIBUNAL RELIED UPON THE JUDGMENT O F GUJARAT HIGH COURT IN CIT VS. CLARIS LIFESCIENCES LTD. 326 ITR 251 (GUJ). IN ITS DECISION THE HONBLE GUJARAT HIGH COURT HELD THAT THE CUT-OFF DA TE MENTIONED IN THE CERTIFICATE ISSUED BY THE DSIR WOULD BE OF NO RELEV ANCE. WHAT IS TO BE SEEN IS THAT THE ASSESSEE WAS IN INDULGING IN R&D ACTIVI TY AND HAD INCURRED THE EXPENDITURE THEREUPON. ONCE A CERTIFICATE BY DSIR I S ISSUED, THAT WOULD BE SUFFICIENT TO HOLD THAT THE ASSESSEE FULFILS THE CO NDITIONS LAID DOWN IN THE AFORESAID PROVISIONS. THE HONBLE DELHI HIGH COURT FOLLOWED THE DECISION OF THE HONBLE GUJARAT HIGH COURT AND UPHELD THE DECIS ION OF THE TRIBUNAL. THE HONBLE DELHI HIGH COURT QUOTED THE FOLLOWING O BSERVATIONS OF THE HONBLE GUJARAT HIGH COURT AND AGREED WITH THE SAID VIEW: '7. ... THE LOWER AUTHORITIES ARE READING MORE THA N WHAT IS PROVIDED BY LAW. A PLAIN AND SIMPLE READING OF THE ACT PROVIDES THAT ON APPROVAL OF THE RESEARCH AND DEVELOPMENT FA CILITY, EXPENDITURE SO INCURRED IS ELIGIBLE FOR WEIGHTED DE DUCTION. 8. THE TRIBUNAL HAS CONSIDERED THE SUBMISSIONS MA DE ON BEHALF OF THE ASSESSEE AND TOOK THE VIEW THAT SECTI ON SPEAKS OF : (I) DEVELOPMENT OF FACILITY; (II) INCURRING OF EXPENDITURE BY THE ASSESSEE FOR DEVELOPMENT OF SUCH FACILITY; (III) APPROVAL OF THE FACILITY BY THE PRESCRIBED A UTHORITY, WHICH IS DSIR; AND (IV) ALLOWANCE OF WEIGHTED DEDUCTION ON THE EXPEND ITURE SO INCURRED BY THE ASSESSEE. 9. THE PROVISIONS NOWHERE SUGGEST OR IMPLY THAT RES EARCH AND DEVELOPMENT FACILITY IS TO BE APPROVED FROM A PARTI CULAR DATE AND, IN OTHER WORDS, IT IS NOWHERE SUGGESTED THAT DATE O F APPROVAL ONLY WILL BE CUT-OFF DATE FOR ELIGIBILITY OF WEIGHTED DE DUCTION ON THE EXPENSES INCURRED FROM THAT DATE ONWARDS. A PLAIN R EADING CLEARLY MANIFESTS THAT THE ASSESSEE HAS TO DEVELOP FACILITY , WHICH PRESUPPOSES INCURRING EXPENDITURE IN THIS BEHALF, A PPLICATION TO THE ITA NO. 641/BANG/2017 PAGE 15 OF 17 PRESCRIBED AUTHORITY, WHO AFTER FOLLOWING PROPER PR OCEDURE WILL APPROVE THE FACILITY OR OTHERWISE AND THE ASSESSEE WILL BE ENTITLED TO WEIGHTED DEDUCTION OF ANY AND ALL EXPENDITURE SO INCURRED. THE TRIBUNAL HAS, THEREFORE, COME TO THE CONCLUSION THA T ON PLAIN READING OF S. ITSELF, THE ASSESSEE IS ENTITLED TO W EIGHTED DEDUCTION ON EXPENDITURE SO INCURRED BY THE ASSESSEE FOR DEVE LOPMENT OF FACILITY. THE TRIBUNAL HAS ALSO CONSIDERED R. 6(5A) AND FORM NO. 3CM AND COME TO THE CONCLUSION THAT A PLAIN AND HARMONIOUS READING OF RULE AND FORM CLEARLY SUGGEST S THAT ONCE FACILITY IS APPROVED, THE ENTIRE EXPENDITURE S O INCURRED ON DEVELOPMENT OF R&D FACILITY HAS TO BE ALLOWED FOR W EIGHTED DEDUCTION AS PROVIDED BY S. 35(2AB). THE TRIBUNAL HAS ALSO CONSIDERED THE LEGISLATIVE INTENTION BEHIND ABOVE E NACTMENT AND OBSERVED THAT TO BOOST UP RESEARCH AND DEVELOPMENT FACILITY IN INDIA, THE LEGISLATURE HAS PROVIDED THIS PROVISION TO ENCOURAGE THE DEVELOPMENT OF THE FACILITY BY PROVIDING DEDUCTION OF WEIGHTED EXPENDITURE. SINCE WHAT IS STATED TO BE PROMOTED WA S DEVELOPMENT OF FACILITY, INTENTION OF THE LEGISLATURE BY MAKING ABOVE AMENDMENT IS VERY CLEAR THAT THE ENTIRE EXPENDITURE INCURRED BY THE ASSESSEE ON DEVELOPMENT OF FACILITY, IF APPROVED, HAS TO BE ALL OWED FOR THE PURPOSE OF WEIGHTED DEDUCTION. 20. FROM THE ABOVE DISCUSSION IT IS CLEAR THAT PRIO R TO 1.7.2016 FORM 3CL HAD NO LEGAL SANCTITY AND IT IS ONLY W.E.F 1.7.2016 WITH THE AMENDMENT TO RULE 6(7A)(B) OF THE RULES, THAT THE QUANTIFICATION OF THE WEIGHTED DEDUCTION U/S.35(2AB) OF THE ACT HAS SIGNIFICANCE. IN THE PR ESENT CASE THERE IS NO DIFFICULTY ABOUT THE QUANTUM OF DEDUCTION U/S.35(2A B) OF THE ACT, BECAUSE THE AO ALLOWED 100% OF THE EXPENDITURE AS DEDUCTION U/S.35(2AB)(1)(I) OF THE ACT, AS EXPENDITURE ON SCIENTIFIC RESEARCH. D EDUCTION U/S.35(1)(I) AND SEC.35(2AB) OF THE ACT ARE SIMILAR EXCEPT THAT THE DEDUCTION U/S.35(2AB) IS ALLOWED AS WEIGHTED DEDUCTION AT 200% OF THE EXPEND ITURE WHILE DEDUCTION U/S.35(1)(I) IS ALLOWED ONLY AT 100%. THE CONDITIO NS FOR ALLOWING DEDUCTION U/S.35(1)(I) OF THE ACT AND UNDER SEC.35(2AB) OF TH E ACT ARE IDENTICAL WITH THE ONLY DIFFERENCE BEING THAT THE ASSESSEE CLAIMIN G DEDUCTION U/S.35(2AB) OF THE ACT SHOULD BE ENGAGED IN MANUFACTURE OF CERT AIN ARTICLES OR THINGS. IT ITA NO. 641/BANG/2017 PAGE 16 OF 17 IS NOT IN DISPUTE THAT THE ASSESSEE IS ENGAGED IN B USINESS TO WHICH SEC.35(2AB) OF THE ACT APPLIED. THE OTHER CONDITIO N REQUIRED TO BE FULFILLED FOR CLAIMING DEDUCTION U/S.35(2AB) OF THE ACT IS TH AT THE RESEARCH AND DEVELOPMENT FACILITY SHOULD BE APPROVED BY THE PRES CRIBED AUTHORITY. THE PRESCRIBED AUTHORITY IS THE SECRETARY, DEPARTMENT O F SCIENTIFIC INDUSTRIAL RESEARCH, GOVT. OF INDIA (DSIR). IT IS NOT IN DISPU TE THAT THE ASSESSEE IN THE PRESENT CASE OBTAINED APPROVAL IN FORM NO.3CM A S REQUIRED BY RULE 6 (5A) OF THE RULES. IN THESE FACTS AND CIRCUMSTANCES AND IN THE LIGHT OF THE JUDICIAL PRECEDENTS ON THE ISSUE, WE ARE OF THE VIE W THAT THE DEDUCTION U/S.35(2AB) OF THE ACT OUGHT TO HAVE BEEN ALLOWED A S WEIGHTED DEDUCTION AT 200% OF THE EXPENDITURE AS CLAIMED BY THE ASSESS EE AND OUGHT NOT TO HAVE BEEN RESTRICTED TO 100% OF THE EXPENDITURE INC URRED ON SCIENTIFIC RESEARCH. WE HOLD AND DIRECT ACCORDINGLY AND ALLOW THE APPEAL OF THE ASSESSEE. 21. IN THE RESULT, APPEAL BY THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF SEPTEMBER, 2018. SD/- SD/- ( INTURI RAMA RAO ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 14 TH SEPTEMBER, 2018. / D ESAI S MURTHY / ITA NO. 641/BANG/2017 PAGE 17 OF 17 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.